To Our Clients, Colleagues and Friends, 

• Did you know that the U.S. banking system has about $7.2 trillion in loans?  Assume a 10% loss as real estate values continue to decline, and that is a $720 billion loss. And that doesn’t even include consumer loans.

• Are you a “professional depositor”?  If so, you made good money from 1998 – 2007, in which the first day pop averaged 16.1%, with every one of those years ending up positive.  The worst year was 1999 with an 8.1% average gain and the best was 2003 when the average first day pop was 37.5%. All this easy money came to a halt last year, with the average actually being negative.  There were only 10 conversions, and only four of them popped upward the first day, and barely.  If you don’t invest in mutual conversions, you should have skipped this item.  Our apologies.

• AOL has periodic polls, and a recent one asked if the Obama’s choice of a Portuguese Water Dog was a good choice or a bad choice.  Amazingly, over 110,000 people voted.  Who cares???? 
• The Royal Bank of Scotland just reported a 7.9 billion Euro loss for the quarter.  That’s about $10.2 billion.  RBS was founded in the 1600’s

• We know of one West Coast mortgage lender who was told their warehouse line wouldn’t be re-newed come March 15.  They were, in essence, given three weeks to replace it, a near impossibility.  As Tim Carlsen of Hyperion Mortgage in Oregon reminds us, it’s another example of why you want to stagger the renewal dates on your lines.
• We’ve gotten reports that Fannie and now the MI companies are auditing every loan done in the past three years.  Damn, this has sure gotten to be a tough business.
• March is a busy, crazy month for us.  We’ll be in Grand Rapids , Seattle , Greenwood Village ( Colorado ), Sun Prairie (guess what state?), Independence ( Ohio ), Ann Arbor , Georgia , Maryland , Dallas , and a few others.  We once did a project in Estonia , and why don’t we have more jobs in Europe ?  We’re open to work in Paris , London , Venice , Budapest and Prague ? Also Honolulu , the Virgin Islands , and Phukett. And all beachfront communities in Mexico , The Caribbean, and Key West .
• People are interesting.  Last week we compared Ronald Regan to Richard Nixon.  We thought this would engender a slew of e-mails, but we didn’t get a single response.  But we mentioned an obscure folk singer who probably made her last album 30 years ago, and we get flooded with e-mails about her.  Interesting.  The biggest response we ever got was when we incorrectly said that Pamela Anderson had just celebrated her 50^th birthday (or was it Demi Moore?) and we got inundated with letters telling us she was only forty.  Go figure.
• Speaking of unusual e-mails, we once referred to the Bank of America as the BofA.  Someone fairly high up at Indy Mac wrote us a long letter saying that the word the shouldn’t go in front of the BofA.  It was simply Bank of America or BofA and not the Bank of America.  It’s weird because this was about a week before Indy Mac was closed down.  You’d think people would have had more important things to worry about at a time like that.   By the way, what is it?  BofA or the BofA?
• Don’t despair.  We just had dinner with two first tier warehouse lenders and both are still writing commitments.  Both have good pricing and terrific service.  All is not lost.
• Regulators handed out nine Cease & Desist Orders last week, or at least that’s how many we counted.  All the usual stuff: Increase capital, have better Board oversight, improve credit quality, etc. etc. etc.  If you get a C&D, you must have a good attorney help you get out from under it. And it needs to be an attorney who has helped other institutions get out from under such regulatory orders.

Hey, it looks like we’re getting back to a twice-a-week schedule for the Garrett, Watts Report.  While we send it to many people who are not current clients, we really do intend it for clients or other people who might become clients.   We get requests all the time from people who want to get on our distribution list, people in professions we’re not involved in, and we don’t add them. It really is just for mortgage bankers, commercial bankers, and people in closely related fields.  You might be surprised at the relatively small number of people who get this.  It’s well under a thousand. 

By the way. we added our tag line down below:  “Garrett, Watts , helping you increase revenue, control costs, and better manage risk.”  See you next week.   

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Joe Garrett and Corky Watts  -  Garrett, Watts & Co.    -  510-469-8633   

Helping mortgage lenders increase revenues, control costs, and better manage risk.